Free Annual Reports
Corning's Crystal Clear Quarter
Corning (NYSE: GLW), the maker of glass for flat-panel TVs, computers and mobile device screens as well as the manufacturer of optical fiber and cable, increased its income nearly 50% in the second quarter. The sales surge for devices that use its thin liquid-crystal-display (LCD) technology continued to be the major revenue producer for the company. While demand has been robust so far this year, it is not expected to keep up at the same high pace.
IN PICTURES: 20 Lazy Ways To Save Money
Crystal Clear Profits
Revenue was $1.71 billion for the quarter, up from $1.4 billion in Q2 last year. LCD glass is the major part of Corning's business, and the company holds two-thirds of the total LCD market. Its net income rose to $913 million, or 58 cents a share, from $611 million or 39 cents a share. Corning's Gorilla Glass, an ultra-thin, chemically strengthened glass used in tablet computers and touchscreen phones, accounted for $125 million in sales. This number is expected to increase to $1 billion next year, based on the potential for Gorilla Glass to be used in the TV market.
Future Tech: OLED Display
Samsung, along with its partner Universal Display (Nasdaq: PANL), has been experimenting with its Organic Light-Emitting Diode technology for screens. This is different from Corning's Gorilla Glass. OLED works by pasting pixel elements onto plastic instead of glass. Universal Display has already licensed this technology to LG Display (NYSE: LPL). Current use has been limited to small screens, such as on SanDisk's (Nasdaq: SNDK) MP3 players or Nokia's (NYSE: NOK) cell phones, and a small Sony (NYSE: SNE) OLED TV. Although this technology may not become widespread until a generation after the LCD, investors might want to at least be aware of it.
Corning's Segments
All Corning's major business divisions contributed to its strong quarter. The breakdown went like this: display, which includes the LCD panel, increased revenue 23.9 percent year over year. The display segment accounted for 49 percent of total revenue. Telecommunications, which included a fiber built in Canada, was up only 0.9 percent year over year but more than 21 percent sequentially. This segment is 26 percent of Corning's revenue. The environmental technologies division, which includes anti-pollution automotive equipment, was up 39 percent from last year. Life sciences, 7 percent of the revenue, also saw substantial gains. Specialty material, the division with Gorilla Glass, saw sales jump 77.5 percent year over year. Margins were up slightly while capital expenditure (CAPEX) is projected to increase from $1.2 billion this year to $2 billion in 2011. High non-U.S. demand, notably Asia, was a key factor for revenue gains.
Corning's Business Year Ahead
Demand for Gorilla Glass is expected to grow, while the main business with LCD panel glass is expected to slow down temporarily. Retail demand for LCD TVs is strong in Asia, but there is concern over domestic demand. Softer demand for PCs, as well as inventory buildup of the LCD panels, could blunt revenue going forward. This slowdown, along with the hefty CAPEX commitment, has the investment community at least taking note that Corning's revenue picture going forward is not without caution.
Corning Stock
For fundamental investors, the cautions about Corning are important. Although the company has performed brilliantly so far this year, concerns about the potential softened demand are real. Corning may have already had its best quarters for the year. With its heavy concentration on the display business segment, the LCD panels, investors should realize how Corning's revenue depends on that market. Over the years, Corning has transformed itself from a traditional glass-making company into a fiber-optic provider, and it is now the dominant LCD maker, so its management has adapted. Still, despite the stock selling at a low P/E ratio, we'd at least wait to see the better earnings picture sustained for several more quarters. (To learn more, check out our Fundamental Analysis Tutorial.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
IN PICTURES: 20 Lazy Ways To Save Money
Crystal Clear Profits
Revenue was $1.71 billion for the quarter, up from $1.4 billion in Q2 last year. LCD glass is the major part of Corning's business, and the company holds two-thirds of the total LCD market. Its net income rose to $913 million, or 58 cents a share, from $611 million or 39 cents a share. Corning's Gorilla Glass, an ultra-thin, chemically strengthened glass used in tablet computers and touchscreen phones, accounted for $125 million in sales. This number is expected to increase to $1 billion next year, based on the potential for Gorilla Glass to be used in the TV market.
Future Tech: OLED Display
Samsung, along with its partner Universal Display (Nasdaq: PANL), has been experimenting with its Organic Light-Emitting Diode technology for screens. This is different from Corning's Gorilla Glass. OLED works by pasting pixel elements onto plastic instead of glass. Universal Display has already licensed this technology to LG Display (NYSE: LPL). Current use has been limited to small screens, such as on SanDisk's (Nasdaq: SNDK) MP3 players or Nokia's (NYSE: NOK) cell phones, and a small Sony (NYSE: SNE) OLED TV. Although this technology may not become widespread until a generation after the LCD, investors might want to at least be aware of it.
All Corning's major business divisions contributed to its strong quarter. The breakdown went like this: display, which includes the LCD panel, increased revenue 23.9 percent year over year. The display segment accounted for 49 percent of total revenue. Telecommunications, which included a fiber built in Canada, was up only 0.9 percent year over year but more than 21 percent sequentially. This segment is 26 percent of Corning's revenue. The environmental technologies division, which includes anti-pollution automotive equipment, was up 39 percent from last year. Life sciences, 7 percent of the revenue, also saw substantial gains. Specialty material, the division with Gorilla Glass, saw sales jump 77.5 percent year over year. Margins were up slightly while capital expenditure (CAPEX) is projected to increase from $1.2 billion this year to $2 billion in 2011. High non-U.S. demand, notably Asia, was a key factor for revenue gains.
Corning's Business Year Ahead
Demand for Gorilla Glass is expected to grow, while the main business with LCD panel glass is expected to slow down temporarily. Retail demand for LCD TVs is strong in Asia, but there is concern over domestic demand. Softer demand for PCs, as well as inventory buildup of the LCD panels, could blunt revenue going forward. This slowdown, along with the hefty CAPEX commitment, has the investment community at least taking note that Corning's revenue picture going forward is not without caution.
Corning Stock
For fundamental investors, the cautions about Corning are important. Although the company has performed brilliantly so far this year, concerns about the potential softened demand are real. Corning may have already had its best quarters for the year. With its heavy concentration on the display business segment, the LCD panels, investors should realize how Corning's revenue depends on that market. Over the years, Corning has transformed itself from a traditional glass-making company into a fiber-optic provider, and it is now the dominant LCD maker, so its management has adapted. Still, despite the stock selling at a low P/E ratio, we'd at least wait to see the better earnings picture sustained for several more quarters. (To learn more, check out our Fundamental Analysis Tutorial.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Greg Sushinsky
Greg Sushinsky is a passionate independent investor, who has done his own research, analysis and investing for 20 years. One of his earliest investing memories was when he first saved and bought U.S. Savings Bonds with his own money as a small child. From there, he studied investing on his own and made small stock purchases as he grew as an investor.
Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.
Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.
Free Annual Reports
